Cummins Reports Strong Third Quarter Revenues and Earnings; Reaffirms Guidance for Record Profit in 2007
COLUMBUS, Ind.--(BUSINESS WIRE)--
Cummins Inc. (NYSE:CMI) today reported record revenues and higher earnings for the third quarter, led by quarterly-best sales in three of its four business segments. Given the Company's performance through the first nine months of 2007 and the outlook for the fourth quarter, Cummins remains on pace to meet its earnings guidance of $7.15-$7.65 a share, which would make 2007 the most profitable year in company history.
Sales grew 20 percent to $3.37 billion, from $2.81 billion during the same period in 2006, eclipsing the Company's previous high mark set in the second quarter of 2007. Net income for the third quarter increased 7.6 percent to $184 million, or $1.84 per diluted share, from $171 million, or $1.69 per diluted share in the third quarter last year.
Earnings Before Interest and Taxes (EBIT) rose 3.4 percent to $306 million, or 9.1 percent of sales, from $296 million, or 10.5 percent of sales, in the same period in 2006. Earnings growth was moderated by a downturn at some OEM customers, and the expected higher costs associated with the introduction of new emissions-related products.
"We continue to experience significant growth in most of our markets around the world, and are well-positioned to take advantage of many opportunities for future growth," said Cummins Chairman and Chief Executive Officer Tim Solso. "Our technology leadership has resulted in a sustainable competitive advantage for Cummins, and we remain focused on producing profitable growth for all our stakeholders."
In the Company's Engine business, gains in many markets - most notably in the light-duty automotive, medium-duty truck, construction and mining markets - propelled the segment to a 17 percent sales increase compared to the same period last year. That increase came despite continued weakness in the North America heavy-duty truck engine market related to emission regulation changes. The industry forecast for trucks in that market is now approximately 180,000 units for the full year 2007, down almost 50 percent from 2006.
Even though this market is down significantly from the prior year, the Company continues to gain market share, reflecting customer preference for Cummins' emissions-compliant products. Through August, the Company held a market-leading 36 percent share of the North America Class 8 truck engine market, compared to 27 percent at the end of 2006.
The Company's Power Generation business reported record sales of $776 million in the quarter, a 24 percent increase from the third quarter of 2006, and saw Segment EBIT jump 46 percent over the same period, on strong volumes and improved pricing.
The Distribution Business reported record sales and Segment EBIT in the third quarter, with sales increasing 14 percent to $395 million and Segment EBIT growing 21 percent from the third quarter of 2006.
The Components segment - which includes the filtration, exhaust aftertreatment, turbocharger and fuel systems businesses - reported significantly improved profitability and higher sales compared to the third quarter of 2006. Segment sales increased 31 percent from 2006, while segment EBIT increased 79 percent over last year. Gross margins for the segment were affected by the costs associated with the introduction of new emissions-compliant products, but emphasis on cost reduction across the segment resulted in stronger EBIT performance.
The Company's strong performance and improved working capital management resulted in increased cash flow from operations in the third quarter, compared to both the previous quarter and the same period in 2006. Cummins purchased 1.5 million shares of its common stock at a cost of $174 million as part of the stock repurchase program authorized by the Company in July 2006. Cummins also continued to invest in growth opportunities during the third quarter and expects to spend $320 million to $340 million on capital projects in 2007.
The Company shared its growth message and financial targets at a conference for financial analysts in September at the Company's Jamestown (N.Y.) Engine Plant. During that conference, the Company outlined its plans to achieve continued profitable growth over the next several years, with an overall revenue growth target of 12 percent and EBIT target of 10 percent of sales.
The Company also expects to spend $2.5 billion on capital expenditures in the next five years to meet the demand for current and future products, and with its partners, invest another $1 billion into growing joint venture operations around the world.
Also, this month J.D. Power and Associates gave Cummins its highest award for customer satisfaction in the vocational truck engine category. The Cummins ISX and ISM heavy-duty engines, manufactured at the Jamestown Engine Plant, comprise almost all the Cummins models in this market segment.
Third quarter details
Engine Segment
Sales rose 17 percent to a record $2.15 billion. Segment EBIT of $155 million, or 7.2 percent of sales, was 15 percent lower than $183 million (9.9 percent of sales) for the same period in 2006. Segment EBIT was negatively affected by higher material costs and warranty costs for new emissions-compliant engines.
Shipments to the light-duty automotive markets grew 38 percent for the quarter, while global medium-duty truck engines shipments increased 23 percent. Joint venture income related to engine sales also increased, due to strength at Dongfeng Cummins Engine Co. in China.
Power Generation Segment
The segment continued its extremely strong performance in the third quarter, with sales increasing 24 percent from a year ago to a record $776 million. Segment EBIT rose 46 percent to $83 million, or 10.7 percent of sales, compared to $57 million, or 9.1 percent of sales.
Sales in the Company's Commercial business - the segment's largest - rose 34 percent, with North America, Latin America and Europe driving the growth. Alternator sales grew 40 percent, led by sales in Europe, China and India. The Company's consumer business grew by 10 percent, driven by strength in portable generator sets to international markets and gains in marine and commercial mobile sales.
Distribution Segment
Sales increased 14 percent from the same period in 2006 to $395 million. Segment EBIT of $46 million, or 11.6 percent of sales, was a quarterly record and a 21.1 percent increase from $38 million, or 11 percent of sales, for the same period in 2006. Power generation sales in the Middle East, engine and parts sales in Europe and strong growth at the Company's North American distributor joint ventures were key drivers of the business' performance in the quarter.
Components Segment
Sales grew 31 percent from the same period in 2006 to $741 million, with Turbo Technologies increasing 46 percent, Emission Solutions increasing 220 percent and Filtration reporting an 8 percent increase in sales, compared to the third quarter of 2006.
Segment EBIT rose 79 percent to $34 million, or 4.6 percent of sales, compared to $19 million, or 3.4 percent of sales last year.
Webcast information
Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.
Presentation of Non-GAAP Financial Information
EBIT is a non-GAAP measure used in this release. EBIT is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBIT is a measure used internally to assess the performance of the operating units. Management also believes that certain other non-GAAP measures, such as net income excluding one-time tax benefits and cash flow from operations excluding pension contributions, can provide meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain items that affect the overall comparability.
Forward-looking statements disclosure
Information provided in this release and on the webcast that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to, general economic, business and financing conditions, labor relations, governmental action, competitor pricing activity, expense volatility and other risks detailed from time to time in Cummins Securities and Exchange Commission filings.
About Cummins
Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins serves customers in more than 160 countries through its network of 550 Company-owned and independent distributor facilities and more than 5,000 dealer locations. Cummins reported net income of $715 million on sales of $11.4 billion in 2006. Press releases can be found on the Web at www.cummins.com.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (a)
Three months ended Nine months ended
-------------------------- ------------------
Sept. 30, Oct. 1, July 1, Sept. 30, Oct. 1,
2007 2006 2007 2007 2006
--------- -------- ------- --------- --------
Millions
(except per share amounts)
Net sales $3,372 $2,809 $3,343 $9,532 $8,329
Cost of sales 2,720 2,192 2,673 7,658 6,500
--------- -------- ------- --------- --------
Gross margin 652 617 670 1,874 1,829
Operating expenses and
income
Selling and
administrative
expenses 340 291 314 937 853
Research and
engineering expenses 82 81 74 236 243
Investee equity,
royalty and other
income 58 37 52 146 105
Other operating income
(expenses), net 1 (4) 7 6 (3)
--------- -------- ------- --------- --------
Operating earnings 289 278 341 853 835
Interest income 9 14 7 27 33
Interest expense 14 23 14 44 76
Other income, net 8 4 6 23 8
--------- -------- ------- --------- --------
Earnings before income
taxes and minority
interests 292 273 340 859 800
Provision for income
taxes 97 92 112 284 244
Minority interests in
earnings of
consolidated
subsidiaries 11 10 14 34 30
--------- -------- ------- --------- --------
Net earnings $ 184 $ 171 $ 214 $ 541 $ 526
========== ======= ======= ========== =======
Earnings per common
share (b)
Basic $ 1.86 $ 1.70 $ 2.14 $ 5.43 $ 5.62
Diluted $ 1.84 $ 1.69 $ 2.13 $ 5.39 $ 5.23
Cash dividends declared
per share $ 0.25 $ 0.18 $ 0.18 $ 0.61 $ 0.48
(a) Prepared on an unaudited basis in accordance with accounting
principles generally accepted in the United States of America.
(b) All per share amounts reflect the two-for-one stock split
distributed April 9, 2007.
Certain reclassifications have been made to 2006 amounts to
conform to the 2007 presentation.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (a)
September 30, December 31,
2007 2006
-------------- -------------
Millions
(except par value)
ASSETS
Current assets
Cash and cash equivalents $ 624 $ 840
Marketable securities 120 95
Receivables, net 2,025 1,767
Inventories 1,770 1,393
Other current assets 408 393
-------------- -------------
Total current assets 4,947 4,488
Long-term assets
Property, plant and equipment, net 1,544 1,574
Investments in and advances to equity
investees 448 345
Goodwill 371 356
Other intangible assets, net 160 128
Other assets 562 574
-------------- -------------
Total assets $8,032 $ 7,465
============== =============
LIABILITIES
Current liabilities
Short-term borrowings $ 115 $ 164
Accounts payable 1,345 1,104
Other accrued expenses 1,244 1,131
-------------- -------------
Total current liabilities 2,704 2,399
Long-term liabilities
Long-term debt 549 647
Other liabilities 1,309 1,363
-------------- -------------
Total liabilities 4,562 4,409
-------------- -------------
MINORITY INTERESTS 275 254
-------------- -------------
SHAREHOLDERS' EQUITY (b)
Common stock, $2.50 par value, 300
shares authorized, 110.2 and 110.0
shares issued
276 137
Additional paid-in capital 1,426 1,500
Retained earnings 2,488 2,009
Treasury stock, at cost, 8.1 and 5.8
shares (469) (212)
Common stock held in trust for employee
benefit plans, 3.4 and 3.8 shares (82) (92)
Unearned compensation (12) (14)
Accumulated other comprehensive loss (432) (526)
-------------- -------------
Total shareholders' equity 3,195 2,802
-------------- -------------
Total liabilities, minority interests and
shareholders' equity $8,032 $ 7,465
============== =============
(a) Prepared on an unaudited basis in accordance with accounting
principles generally accepted in the United States of America.
(b) All share amounts reflect the two-for-one stock split distributed
April 9, 2007.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (a)
Nine months ended
--------------------------
September 30, October 1,
2007 2006
-------------- -----------
Millions
Net cash provided by operating activities $ 523 $ 613
-------------- -----------
Cash flows from investing activities
Capital expenditures (182) (152)
Investments in internal use software (46) (33)
Proceeds from the disposal of property,
plant and equipment 33 32
Investments in and advances to equity
investees (27) (10)
Acquisition of businesses, net of cash
acquired (20) --
Investments in marketable securities--
acquisitions (307) (180)
Investments in marketable securities--
liquidations 295 159
Purchases of other investments (52) --
Other, net (17) (1)
-------------- -----------
Net cash used in investing activities (323) (185)
-------------- -----------
Cash flows from financing activities
Proceeds from borrowings 3 80
Payments on borrowings and capital lease
obligations (122) (132)
Dividend payments on common stock (63) (47)
Proceeds from issuing common stock 3 8
Repurchases of common stock (210) (76)
Other, net (38) (16)
-------------- -----------
Net cash used in financing activities (427) (183)
-------------- -----------
Effect of exchange rate changes on cash and
cash equivalents 11 3
-------------- -----------
Net (decrease) increase in cash and cash
equivalents (216) 248
Cash and cash equivalents at beginning of
year 840 779
-------------- -----------
Cash and cash equivalents at end of period $ 624 $1,027
============== ===========
(a) Prepared on an unaudited basis in accordance with accounting
principles generally accepted in the United States of America.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
Non-
Power segment
Engine Generation Components Distribution items(1) Total
------ ---------- ---------- ------------- --------- ------
Millions
Three
months
ended
September
30, 2007
External
sales $1,890 $ 594 $ 494 $ 394 $ -- $3,372
Inter-
segment
sales 263 182 247 1 (693) --
------ ------ ------- ------ -------- ------
Net
sales 2,153 776 741 395 (693) 3,372
Investee
equity,
royalty
and other
income 24 5 3 26 -- 58
Interest
income 6 1 1 1 -- 9
Segment
EBIT 155 83 34 46 (12) 306
Three
months
ended
October 1,
2006
External
sales $1,619 $ 487 $ 361 $ 342 $ -- $2,809
Inter-
segment
sales 223 137 203 4 (567) --
------ ------ ------- ------ -------- ------
Net
sales 1,842 624 564 346 (567) 2,809
Investee
equity,
royalty
and other
income 16 4 2 15 -- 37
Interest
income 11 2 1 -- -- 14
Segment
EBIT 183 57 19 38 (1) 296
Three
months
ended July
1, 2007
External
sales $1,855 $ 605 $ 516 $ 367 $ -- $3,343
Inter-
segment
sales 254 164 241 1 (660) --
------ ------ ------- ------ -------- ------
Net
sales 2,109 769 757 368 (660) 3,343
Investee
equity,
royalty
and other
income 25 4 (1) 24 -- 52
Interest
income 6 1 -- -- -- 7
Segment
EBIT 186 88 48 46 (14) 354
Nine months
ended
September
30, 2007
External
sales $5,267 $1,730 $1,465 $1,070 $ -- $9,532
Inter-
segment
sales 760 490 690 2 (1,942) --
------ ------ ------- ------ -------- ------
Net
sales 6,027 2,220 2,155 1,072 (1,942) 9,532
Investee
equity,
royalty
and other
income 66 12 1 67 -- 146
Interest
income 20 4 2 1 -- 27
Segment
EBIT 469 248 106 131 (51) 903
Nine months
ended
October 1,
2006
External
sales $4,898 $1,365 $1,079 $ 987 $ -- $8,329
Inter-
segment
sales 661 393 603 12 (1,669) --
------ ------ ------- ------ -------- ------
Net
sales 5,559 1,758 1,682 999 (1,669) 8,329
Investee
equity,
royalty
and other
income 51 10 6 38 -- 105
Interest
income 25 5 1 2 -- 33
Segment
EBIT 552 158 84 105 (23) 876
(1) Includes intercompany eliminations and unallocated corporate
expenses.
A reconciliation of our segment information to the corresponding
amounts in the Consolidated Financial Statements is shown in the
table below:
Three months ended Nine months ended
-------------------------------- ------------------------
September 30, October 1, July 1, September 30, October 1,
2007 2006 2007 2007 2006
------------- ---------- ------- ------------- ----------
Millions
Segment EBIT $306 $296 $354 $903 $876
Less:
Interest
expense 14 23 14 44 76
------------- ---------- ------- ------------- ----------
Earnings
before
income
taxes and
minority
interests $292 $273 $340 $859 $800
============= ========== ======= ============= ==========
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
FINANCIAL MEASURES THAT SUPPLEMENT GAAP
(Unaudited)
Earnings before interest, taxes and minority interests (EBIT)
We define EBIT as earnings before interest expense, provision for
income taxes and minority interests in earnings of consolidated
subsidiaries. We use EBIT to assess and measure the performance of
our operating segments and also as a component in measuring our
variable compensation programs. Below is a reconciliation of EBIT, a
non-GAAP financial measure, to our consolidated net earnings, for
each of the applicable periods:
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30, Oct. 1, July 1, Sept. 30, Oct. 1,
2007 2006 2007 2007 2006
--------- ------- ------- --------- -------
Millions
Earnings before interest
expense, income taxes
and minority interests $306 $296 $354 $903 $876
EBIT as a percentage of
net sales 9.1% 10.5% 10.6% 9.5% 10.5%
Less:
Interest expense 14 23 14 44 76
Provision for income
taxes 97 92 112 284 244
Minority interests in
earnings of
consolidated
subsidiaries 11 10 14 34 30
--------- ------- ------- --------- -------
Net earnings $184 $171 $214 $541 $526
========= ======= ======= ========= =======
Net earnings as a
percentage of net sales 5.5% 6.1% 6.4% 5.7% 6.3%
We believe EBIT is a useful measure of our operating performance for
the periods presented as it illustrates our operating performance
without regard to financing methods, capital structure or income
taxes. This measure is not in accordance with, or an alternative
for, accounting principles generally accepted in the United States of
America (GAAP) and may not be consistent with measures used by other
companies. It should be considered supplemental data.
Cash from operations excluding pension contributions
For the nine months ended
---------------------------
September 30, October 1,
2007 2006
-------------- ------------
Cash provided by operations $523 $613
Add back: pension contributions 144 154
-------------- ------------
Cash provided by operations excluding
pension contributions $667 $767
============== ============
We believe cash provided by operations excluding pension contributions
is a useful measure of our operating performance for the periods
presented as it illustrates our operating performance without regard
to funding decisions. This measure is not in accordance with, or an
alternative for, GAAP and may not be consistent with measures used by
other companies. It should be considered supplemental data.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
SELECTED FOOTNOTE DATA
(Unaudited)
NOTE 1. EARNINGS PER SHARE
The following is a reconciliation of net earnings and weighted-average
common shares outstanding for purposes of calculating basic and
diluted net earnings per share:
Three months ended Nine months ended
------------------------- -----------------
Sept. 30, Oct. 1, July 1, Sept. 30, Oct. 1,
2007 2006 2007 2007 2006
--------- ------- ------- --------- -------
Millions
(except per share amounts)
Net earnings for basic EPS $ 184 $ 171 $ 214 $ 541 $ 526
Interest on junior
convertible
subordinated
debentures, net of tax -- -- -- -- 6
--------- ------- ------- --------- -------
Net earnings for diluted
EPS $ 184 $ 171 $ 214 $ 541 $ 532
========= ======= ======= ========= =======
Weighted-average common
shares outstanding:
Basic 99.1 100.7 100.0 99.7 93.6
Dilutive effect of stock
compensation awards 0.8 0.8 0.6 0.6 0.8
Dilutive effect of
junior convertible
subordinated debentures -- -- -- -- 7.3
--------- ------- ------- --------- -------
Diluted 99.9 101.5 100.6 100.3 101.7
========= ======= ======= ========= =======
Earnings per common share:
Basic $1.86 $1.70 $2.14 $5.43 $5.62
Diluted $1.84 $1.69 $2.13 $5.39 $5.23
The Board of Directors authorized a two-for-one split of Cummins stock
on March 8, 2007, which was distributed on April 9, 2007, to
shareholders of record as of March 26, 2007. All share and per share
amounts have been adjusted to reflect the two-for-one stock split.
NOTE 2. INVESTEE EQUITY, ROYALTY AND OTHER INCOME
Investee equity, royalty and other income included in our Condensed
Consolidated Statements of Earnings for the interim reporting periods
was as follows:
Three months ended Nine months ended
------------------------- -----------------
Sept. 30, Oct. 1, July 1, Sept. 30, Oct. 1,
2007 2006 2007 2007 2006
--------- ------- ------- --------- -------
Millions
North American
distributors $22 $13 $22 $ 59 $ 34
Dongfeng Cummins Engine
Company, Ltd. 12 4 11 29 16
Chongqing Cummins Engine
Company, Ltd. 5 6 5 15 13
Cummins MerCruiser Diesel
Marine LLC. 2 -- 4 9 4
Tata Cummins Limited 3 2 4 9 8
Fleetguard Shanghai Filter
Co. Ltd. 1 2 2 4 4
All others 9 2 2 12 10
--------- ------- ------- --------- -------
Cummins share of net
earnings 54 29 50 137 89
Royalty and other income 4 8 2 9 16
Investee equity, royalty
and other income $58 $37 $52 $146 $105
========= ======= ======= ======== ======
NOTE 3. PROVISION FOR INCOME TAXES
Our tax rates are generally less than the 35 percent U.S. income tax
rate primarily because of lower taxes on foreign earnings, export tax
benefits and research tax credits.
Our effective tax rate for the three and nine months ended September
30, 2007, was 33 percent. Our 2006 provision was reduced in the
second quarter by $28 million due to the favorable resolution of tax
uncertainties related to prior years. In addition, our 2006 provision
was increased in the first quarter by $12 million for the effect of
new Indiana tax legislation. As a result, our effective tax rate for
the three and nine months ended October 1, 2006, was 34 percent and
31 percent, respectively.
NOTE 4. DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense included in operating activities
of the Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2007 and October 1, 2006, was $215 million
and $222 million, respectively.
NOTE 5. SHIPPING AND HANDLING COSTS
Our shipping and handling costs are expensed as incurred. Those
shipping and handling costs associated with operations of our
inventory distribution centers and warehouse facilities were
previously classified as "Selling and administrative expenses" in our
Condensed Consolidated Statements of Earnings. In accordance with
Emerging Issues Task Force (EITF) Issue No. 00-10 "Accounting for
Shipping and Handling Fees and Costs," we previously disclosed the
amount of shipping and handling costs included as "Selling and
administrative expenses" in the notes to our consolidated financial
statements. Beginning January 1, 2007, we revised our accounting
policy and all shipping and handling costs are now classified as
"Cost of sales." This presentation is more consistent with current
industry practice. For purposes of comparability, the $37 million
and $96 million previously classified as "Selling and administrative
expenses" in the three and nine months ended October 1, 2006, has
been adjusted retrospectively to apply the new method. This change
had no impact on operating earnings, EBIT, net earnings, or earnings
per share.
CUMMINS INC. AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL STATEMENTS OF EARNINGS INFORMATION
(Unaudited)
Shipping and handling costs associated with operations of our
inventory distribution centers and warehouse facilities were
previously classified as "Selling and administrative expenses" in our
Consolidated Statements of Earnings. In accordance with Emerging
Issues Task Force (EITF) Issue No. 00-10 "Accounting for Shipping and
Handling Fees and Costs," we previously disclosed the amount of
shipping and handling costs included as "Selling and administrative
expenses" in the notes to our consolidated financial statements.
Beginning January 1, 2007, we revised our accounting policy and all
shipping and handling costs are classified as "Cost of sales." This
presentation is more consistent with current industry practice. For
purposes of comparability, amounts previously classified as "Selling
and administrative expenses" in previous periods have been adjusted
retrospectively to apply the new method. The Consolidated Statements
of Earnings for each of the quarterly periods in 2006 and for the
2006 and 2005 annual periods with all shipping and handling costs
included in "Cost of sales" follows:
For the three For the years
months ended ended
--------------------------------- ---------------
April 2, July 2, Oct. 1, Dec. 31, Dec. 31,
2006 2006 2006 2006 2006 2005
-------- ------- ------- -------- ------- -------
Millions
Net sales $2,678 $2,842 $2,809 $3,033 $11,362 $9,918
Cost of sales 2,112 2,196 2,192 2,397 8,897 7,874
-------- ------- ------- -------- ------- -------
Gross margin 566 646 617 636 2,465 2,044
Operating expenses
and income
Selling and
administrative
expenses 268 294 291 300 1,153 1,003
Research and
engineering
expenses 82 80 81 78 321 278
Investee equity,
royalty and other
income 31 37 37 35 140 131
Other operating
income
(expenses), net 1 -- (4) 3 -- --
-------- ------- ------- -------- ------- -------
Operating earnings 248 309 278 296 1,131 894
Interest income 9 10 14 14 47 24
Interest expense 27 26 23 20 96 109
Other (expenses)
income, net (2) 6 4 (7) 1 (11)
-------- ------- ------- -------- ------- -------
Earnings before
income taxes and
minority interests 228 299 273 283 1,083 798
Provision for income
taxes 85 67 92 80 324 216
Minority interests
in earnings of
consolidated
subsidiaries 8 12 10 14 44 32
-------- ------- ------- -------- ------- -------
Net earnings $ 135 $ 220 $ 171 $ 189 $ 715 $ 550
======== ======= ======= ======== ======= =======
Note:
Amounts reclassified
from "Selling and
administrative
expenses" to "Cost
of sales" $ 33 $ 26 $ 37 $ 34 $ 130 $ 142
Supplemental Data
Sales
$Millions Q1 Q2 Q3 Q4 YTD
-------- -------- -------- -------- --------
2007
Engine Business
Heavy-Duty Truck 424 473 520 1,417
Medium Duty
Truck+Bus 206 320 359 885
Light Duty
Auto+RV 288 418 388 1,094
Industrial 617 665 661 1,943
Stationary Power 230 233 225 688
-------- -------- -------- -------- --------
TOTAL ENGINE
BUSINESS 1,765 2,109 2,153 0 6,027
Power Generation 675 769 776 2,220
Components 657 757 741 2,155
Distributors 309 368 395 1,072
Eliminations (589) (660) (693) (1,942)
-------- -------- -------- -------- --------
TOTAL 2,817 3,343 3,372 0 9,532
======== ======== ======== ======== ========
2006
Engine Business
Heavy-Duty Truck 608 618 632 640 2,498
Medium Duty
Truck+Bus 215 247 253 256 971
Light Duty
Auto+RV 331 341 267 322 1,261
Industrial 481 516 507 559 2,063
Stationary Power 186 174 183 175 718
-------- -------- -------- -------- --------
TOTAL ENGINE
BUSINESS 1,821 1,896 1,842 1,952 7,511
Power Generation 536 598 624 658 2,416
Components 555 563 564 599 2,281
Distributors 317 336 346 386 1,385
Eliminations (551) (551) (567) (562) (2,231)
-------- -------- -------- -------- --------
TOTAL 2,678 2,842 2,809 3,033 11,362
======== ======== ======== ======== ========
----------------------------------------------------------------------
----------------------------------------------------------------------
Engine Shipments
Units Q1 Q2 Q3 Q4 YTD
-------- -------- -------- -------- --------
2007
Midrange 107,200 133,500 130,500 371,200
Heavy-duty 19,000 23,800 24,800 67,600
High Horsepower 4,300 4,700 4,600 13,600
-------- -------- -------- -------- --------
TOTAL 130,500 162,000 159,900 0 452,400
======== ======== ======== ======== ========
2006
Midrange 114,500 121,800 104,800 118,800 459,900
Heavy-duty 30,100 31,400 31,000 30,900 123,400
High Horsepower 3,700 4,000 4,100 4,500 16,300
-------- -------- -------- -------- --------
TOTAL 148,300 157,200 139,900 154,200 599,600
======== ======== ======== ======== ========
Source: Cummins Inc.
Released October 25, 2007